The social gaming industry is making its contribution to the world economy. According to Parks Associates, the social gaming industry will increase its revenue by five times between 2010 and 2015, when it is expected to top $5 billion. Recently, the value of the sale of virtual goods in the online games market has been surpassed by that of social networking sites. This market expects to see an increase in value from $2.2 billion in 2009 to $6 billion before 2014. Each of these applications, which offer at least some free features, offers new opportunities for integrating e-commerce, monetization, and sales and marketing of content and products.
According to media consultant, Dan Taylor, choosing monetization strategies depends on the social game value chain, which can be summarized into 5 phases: idea, balance, goods/currency, payments and commissions. First, the game idea is the foundation of everything else that follows. Publishers with a game idea must evaluate the revenue potential of the game. Once the game has been fleshed out, the next phase of the value chain is game balancing, where game publishers define crucial monetization factors in order to fully develop the virtual economy of the game. Virtual economies function like real world economies, and therefore issues such as supply and demand, inflation, speculation, etc., must be factored in to create a pricing structure that will remain balanced and fair within the game, provide publishers with a decent return for their efforts, and remain attractive to the end user, i.e. cost vs. value. In addition to these variables, developers must also factor in limited offers and promotions that will incentivize users to either play or purchase more, while at the same time, maintaining the delicate balance of their virtual economy.
Virtual economies arise out of interactions among players in the virtual world, usually as they exchange virtual goods and earn valuable objects that provide the participant with both utility and social value. Selling virtual goods within social games has become the dominant business model on social networks because social games can support virtual goods that combine game play benefit with social value.
A virtual economy may also include reward programs. A reward program is a form of a loyalty program. Loyalty programs allow a publisher to identify their customers and reward them as a retention mechanism. An effective reward program also enables the publisher to identify potential best customers and market to them accordingly. The basic principle is that by rewarding the best customers they in turn will continue to reward you with their business as they feel recognized and appreciated. The key objective of loyalty or reward programs is to strengthen the two-way loyalty bond between the publisher and its best customers. Every time a reward program device, most commonly a “reward card” is used, it not only identifies the customer but also links relevant transactions to their record. This data can then be analyzed and used to reward customers with the objective of retaining or growing their profit contribution.
Virtual currency is typically the medium of exchange used for virtual goods. Each game typically has its own nomenclature for its virtual currency (e.g. coinz, tokenz, gcash, etc.) but they all provide a means of exchange allowing users to purchase items. Virtual currency may be purchased with real world currency or earned by obtaining various goals in the application. This exchange takes place in a virtual marketplace (primary market, or game-to-player market) or a virtual auction house (secondary market or player-to-player market).
Once the virtual economy is set, publishers need to build a bridge to “real world” money by providing a payments system. Payments services can be provided by a service provider or directly from the end user themselves. When application publishers choose to receive payment directly, there are a number of “real world” financial elements to be considered, including credit card fraud, charge backs, taxation, and much more. Publishers must manage how they'll aggregate these payments. If they have chosen a service provider to handle this for them, they may choose either a branded or white label payment service.
Commissions refer to the amount of revenue earned by the provider for their services. Commissions are highly dependent upon the title's success and associated volume, not only of active users, but also profits derived from sales of virtual goods.
Once the application publisher determines how the application will be monetized, a specific partner may be chosen to provide the monetization environment. In the social network/free-to-play gaming field, there are generally three unique forms of monetization: offer companies, payment service providers, and technology firms. Each has its own area of specialization, and game developers can mix and match from each provider. Some offer only a niche option, while others can provide a complete turn-key solution. Offer companies may provide a “bare bones” solution, in so much as they only offer one form of monetization—that which arrives via a third party. Examples of offer companies would include Offerpal, SuperRewards, Boomerang Networks, Gratispay or Sponsorpay. This form of monetization focuses only on offering special offers, say an online survey to be filled out in exchange for some form of virtual currency. Offers are an important revenue factor as it helps monetize the portion of users that are not willing to spend real money on their virtual goods and currency purchases. One side effect of employing offers as a form of monetization is that game publishers will be sending players out to a third party, thereby losing the game branded experience. Offer companies clearly brand themselves, and it's here where the actual interaction between player and the monetization business model takes place. This can be at odds with optimizing the user experience, since the buying experience in an in-application e-commerce ecosystem should be as seamless and as simple as possible. While the player should be aware of his/her purchasing capabilities at all times, he/she should only momentarily leave the game to make a purchase without ever feeling as though he/she has actually left the game. In other words, the solution should be wholly integrated into the various parts of the gaming experience. Therefore, offer companies' contribution to in-application monetization only supports a small piece of the value chain.
Payment service providers offer game and social network publishers different pieces of the value chain, but due to their nature do not completely fulfill it. Examples of payment service providers include Chase PaymentTech, NetGiro, and Global Collect. These firms offer application publishers a direct integration of payment methods, i.e. there's no sending players out to a separate location to make the transaction, and then re-routing them back into the game. By using a payment service provider, application publishers can keep players in-house and thereby potentially increase application stickiness as well as ‘time on-site’ or ‘time in-game’. While other companies build their brand by maintaining their own identity throughout the transaction, payment service providers can offer publishers a white label solution, making the technology appear as their own, or remain self-branded. These payment service providers typically are specialized financial transaction experts. Similarly offer companies are strong in the ad-broker business, and offer application publishers only a part of the value chain but do not complete it.
Some software application publishers choose to work with technology providers, such as Playspan, Live Gamer and fatfoogoo. While each of these providers have their own unique set of solutions, essentially, they allow application publishers to do what they do best—develop applications. Technology companies provide publishers with a service that addresses each piece of the value chain. Many of these companies have relationships with selected payment service providers, thereby ensuring financial excellence, as well as offering solutions for game balancing, virtual goods/items store management, virtual currency wallets, detailed analytics and reporting features, and user management. Technology providers free up application publishers to focus on application development, marketing, and balancing their application as it grows with the provided tools.
Like any online merchant, game and other application publishers are especially concerned about limiting their exposure to fraud while offering their players and users the richest, most exciting game experience possible. Online fraud, particularly in the gaming area, comes in many forms, including software piracy, theft of passwords and inventory owned by/assigned to user accounts and payment/commerce related fraud.
A need exists for a system that offers an extensive and comprehensive monetization feature set with optimal fraud detection and management features. Examples of desirable features include detecting, preventing and mitigating fraud, managing the game economy, offering flexible payment methods (e.g. payment using both virtual and real currency from one account) and reverse wallet transactions that offer the greatest protections for the game/application publisher. The present invention provides a solution to these needs and other problems, and offers other advantages over the prior art.